In a move poised to significantly accelerate foreign direct investment (FDI) approvals, the Indian government is empowering its trade missions abroad. This strategic shift aims to reduce bureaucratic hurdles and position India as a more attractive investment destination amidst the ongoing global realignment of supply chains.
The core of this initiative involves granting Indian missions the authority to provide in-principle approvals for FDI proposals originating from various countries. By decentralizing the initial approval process, the government intends to cut through red tape and expedite investment decisions. This is particularly relevant in a global landscape where investors are actively seeking alternatives and India is keen to present itself as a compelling option.
This decision follows consultations with stakeholders and reflects the government's commitment to ease procedures and attract greater FDI. Proposed reforms may include time-bound approvals and a streamlined single-window clearance system to enhance India's business climate. Experts have suggested that implementing time-bound approvals for FDI applications, establishing clear approval guidelines, and creating a seamless single-window clearance system will further improve India's business environment for overseas investors. The government is also considering "deemed approvals," where FDI applications are automatically approved if not processed within a specific timeframe.
The Department for Promotion of Industry and Internal Trade (DPIIT) has been actively engaging with various government departments, regulators, industry associations, advisory and law firms, pension funds, private equity, and venture capital firms to gather suggestions for facilitating foreign investments.
The government has been streamlining the FDI clearance mechanism so that proposals get cleared in the shortest time possible. FDI in most sectors is under the automatic route, and the government is working to streamline the processes for the few sectors remaining in the restricted category.
Over the past decade (2014-24), FDI equity inflows into the manufacturing sector have reached $165.1 billion, a 69% increase from the previous decade (2004-14). The government aims to increase overall FDI to $100 billion in the coming years. To promote FDI, the Government has put in place an investor-friendly policy, wherein most sectors, except certain strategically important sectors, are open for 100% FDI under the automatic route. More than 90% of the FDI inflow is received under the automatic route.
These reforms build upon existing measures to liberalize FDI policies, such as increasing sectoral caps in areas like insurance and telecom. The Union Budget 2025 also announced the further increase of FDI sectoral cap for the insurance sector from 74% to 100%. Furthermore, the government continuously strives to attract more FDI by removing regulatory barriers, streamlining processes, developing infrastructure, bettering logistics and improving the business environment by enhancing the Ease of Doing Business (EoDB).
